SAY — Saratoga Investment Corp.

Saratoga Investment Corp (SAY) Q3 2026 Earnings Call Summary

1. Key Financial Results and Metrics

• Net Asset Value (NAV): Increased to $413 million, up 10.2% year-over-year and 0.7% from the previous quarter.
• NAV per Share: Decreased to $25.59, down from $26.95 a year ago and slightly down from $25.61 last quarter.
• Net Investment Income (NII): Adjusted NII was $9.8 million, down 21.3% year-over-year but up 7.8% sequentially. NII per share was $0.61, reflecting a 32.2% decline from the prior year but a 5.2% increase from the previous quarter.
• Return on Equity (ROE): Reported at 13.5%, above the industry average of 6.6%.
• Total Portfolio Fair Value: 1.7% above cost, with core non-CLO portfolio at 2.1% above cost.
• Cash Position: Decreased to $169.6 million, with significant liquidity available for future investments.

2. Strategic Updates and Business Highlights

• Dividend: Monthly base dividend of $0.25 per share announced for Q4 2026, maintaining a strong yield of 12.9%.
• Investment Activity: Net originations of $17.2 million, including three new portfolio companies and nine follow-on investments. Continued strong performance from core BDC portfolio despite market volatility.
• Credit Quality: 99.8% of credits rated in the highest category, with only one investment on nonaccrual status (Pepper Palace), which has been successfully restructured.
• Market Positioning: Increased M&A activity noted, with a focus on maintaining strong relationships and disciplined underwriting standards.

3. Forward Guidance and Outlook

• Management remains optimistic about future economic opportunities despite current geopolitical tensions and macroeconomic uncertainty.
• Anticipated continued growth in AUM and portfolio quality, with a robust pipeline of investment opportunities.
• Focus on capital deployment in high-quality credit opportunities, with a strong emphasis on maintaining balance sheet strength and liquidity.

4. Bad News, Challenges, or Points of Concern

• Interest Rate Impact: Decreasing levels of short-term interest rates and spreads have negatively affected NII, with yields on core non-CLO BDC portfolio dropping from 11.3% to 10.6%.
• Repayment Activity: High levels of repayments have impacted overall income, with the company experiencing a decline in adjusted NII year-over-year.
• Market Competition: Increased competition in the M&A space may pressure spreads and margins, although management believes this is a temporary situation.

5. Notable Q&A Insights

• M&A Activity: Management noted a broad increase in M&A activity, with expectations for continued normalization in the market. They emphasized their proactive business development efforts to drive deal flow.
• Realized Gains: While there is uncertainty in predicting future realizations, management expressed optimism about the overall health of the portfolio and the potential for further gains.
• Tight Spreads: Questions regarding the impact of tighter spreads on risk-adjusted returns were addressed, with management asserting their commitment to maintaining rigorous underwriting standards and ensuring adequate returns.
• New Relationships: Management acknowledged the balance between pursuing new relationships and leveraging existing ones, emphasizing their thorough evaluation process for new partnerships.

Overall, Saratoga Investment Corp reported solid financial results for Q3 2026, demonstrating resilience in a challenging market while facing headwinds from interest rate changes and competitive pressures. The company remains focused on strategic growth and maintaining high credit quality within its portfolio.